Good Call: Why Sony's Ericsson, Smartphone Moves Are...Smart

Earlier today Ericsson announced that "Sony will acquire Ericsson's 50 percent stake in Sony Ericsson," turning the phone maker into a wholly owned subsidiary for the cool price of €1.05 billion, around $1.47 billion. The buyout ends a 10-year partnership that's been more or less successful, and it lets Ericsson concentrate on its core infrastructure business while Sony charges ahead in its game against the iPhone. The onus is now on Sony to churn out sleek, powerful, cleverly priced smartphones.

When we spoke to Ericsson's CEOHans Vestberg last week, he was reluctant to comment on the rumors about a Sony buyout: "Always around a company like ours there are speculations and rumors all the time, and as a general policy we don't comment on rumors."

And when reminded that Apple's CEO had recently decried rumors in the media about the tech industry, Vestberg laughed and noted "I won't comment on that either!" But the rumor proved true, and in the press release today he notes that the original Sony partnership 10years ago was about "combining Sony's consumer products knowledge with Ericsson's telecommunication technlogy expertise" in a "perfect match." His company has evidently decided it's time to, as he told us, "execute on [our] own strategy" and concentrate on its core business while Sony sails on with the phone wing. And while the move makes excellent sense for Ericsson, for the average phone consumer it's that last bit that's most exciting.

In many ways, this is all about branding: While Sony-Ericsson is the "sixth-biggest player in the global market," according to Ericsson, Sony by itself has a much stronger brand identity—carried by its audio electronics, TV business, computing and peripherals businesses. Sony has recently tried to bring the Sony brand to its first new-generation tablet PC devices with, it has to be argued, a high degree of success. Sony own-branded phones would benefit from Sony's public image, instead of being distinctly advertised as SE-branded devices.

Next up is the question of design. Sony's consumer electronics have for a long time been associated with quality and distinctive design principles, including in its recent S-range of Android tablets—which stand out among almost every other competitor with the iPad as having their own identifiable design. Sony went for a unique teardrop tapered shape for one variant, and an unusual curved-back book-flip design for the other. Though we aren't clear about the way Sony and Ericsson collaborated on the design of their devices (we've contacted them to try to discern this), it's probable that Ericsson brought its own ideas to the table as it had created some elegant and successful devices in the past. So perhaps Sony can now be freer to create more unique phone designs that stand out in a marketplace where nearly every device is a low-resolution copy of a slab-design inspired by Apple.

Then we come to technology. Fairly recently Sony-Ericsson confirmed that its planned and issued smartphone devices for 2011 would all get the latest Android 4.0 Ice Cream Sandwich update, which is Google's most sophisticated and slick version of the OS yet. That's something that not every Android handset maker can say—and the lack of updates or inconsistent updates is one of the biggest criticisms, aside from platform fragmentation, that is levelled at Android. It demonstrates a big commitment from Sony to deliver phones at the cutting edge of the technology...and that's good for future smartphone buyers. Earlier in the year SE also said it was going to commit to buiding NFC tech into its future devices, and chose NXP's technology to build in NFC hardware and software support including security so it could deliver mobile payment solutions—a move that's even more interesting now that Google has begun to roll out its Wallet mobile payment technology.

Patents are in the mix too. Ericsson's Hans Vestberg confirmed to us last week that cross-licensing patent deals are a key part of Ericsson's business, and from Ericsson's press release today we know that the buyout transaction "also provides Sony with a broad IP cross-licensing agreement and ownership of five essential patent families." A significant chunk of the $1.47 billion price is probably because of this patent deal. Whether this insulates Sony from the sorts of patent difficulties that Google's Android system is facing better than other Android handset makers is unclear, but it certainly puts Sony's efforts on a stable platform.

Then there's Sony's statement that it will exclusively release smartphones from 2012. That's a bold move, and it marries with manytheories that the smartphone is the future of mobile phone tech. Specifically, it positions Sony traveling in a different direction than competitor Nokia, which has revealed a suite of phones that appeal to the developed world smartphone market, and feature phones that are aimed squarely at the developing world. Sony's effectively stating its entire business is future-focussed and not going to address legacy markets—tightening Sony's moves to create a complete digital platform for the consumer on all the screens we encounter: TVs, tablets, computers, and phones. With Sony's gaming expertise in the mix too, all this points to being a smart move.